The Week Ahead
Are the markets about to retrace?
January 23, 2023
The Week Ahead:
Good Morning and welcome to another week in the markets.
The week began quietly in Asia as a number of markets were closed for the Lunar New Year holiday. However, the Nikkei made fresh headway while the ASX 200 edged up with a 0.1% rise.
Stocks had closed out a difficult week on Friday in a more optimistic tone. US futures have held onto their gains and European cash markets look positive this morning.
The FTSE is trading around 7790 where it closed late Friday night when the US closed. That’s up 0.27% from the UK cash close on Friday afternoon.
The CAC remains unchanged and the DAX is up 0.15%.
Earnings season is now in full swing, but today marks a lull before a busy period including names like Microsoft, Tesla and Boeing.
Oil prices have enjoyed a strong run over the past week, boosted by China's reopening and hopes of stronger demand in that economy, but investors remain on watch for signs that the US economy is weakening, particularly ahead of the Fed's rate decision next week. This is expected to see an increase of 25bps, a marked slowdown from the 75bps increases that took place in 2022.
Over the next seven days we have the comparison of G7 nations with the purchasing managers’ index updates and the CBI industrial trends survey on Tuesday, followed by Germany’s Ifo Business Climate report on Wednesday, as well as other consumer confidence measures.
On Thursday the US releases its first estimate for GDP movement in the fourth quarter of last year. Spain will follow suit on Friday.
Inflation updates are due from the UK, Australia, Spain, Sweden and Singapore on Wednesday. Japan will also report its Consumer Price Index cost of living measure.
In central banker news, European Central Bank board member Fabio Panetta is due to appear at the Committee on Economic and Monetary Affairs of the European parliament on Monday. Across the Atlantic, the Fed enters its purdah period ahead of the next Federal Open Market Committee meeting, which begins on January 31, and the Bank of Canada’s monetary policy committee is expected to raise its rate a further 25 basis-points to 4.50 per cent with the possibility of it signalling a pause in further increases.
Tech earnings are a key theme this week; investors remain concerned about the prospects for the sector after a series of significant job cut announcements by most of the largest companies.
The approach taken by Microsoft, which reports second quarter figures on Tuesday, could be a model for other Big Tech players to follow. Microsoft chief executive Satya Nadella managed to strike a note of cautious optimism while announcing 10,000 layoffs last week to bring down its cost base.
It will be another week for Elon Musk watchers (just like every other week) with Tesla reporting fourth quarter figures on Wednesday. The company has been cutting prices of its electric vehicles to bolster demand in the US and Europe.
The war in Ukraine has boosted the fortunes of the world’s largest defence contractors with governments promising to increase spending on weapons and other military equipment. Investors will be looking for comments from Lockheed Martin (reporting on Tuesday) and Northrop Grumman (whose numbers are out on Thursday) to see if these promises will actually generate future revenues.
- UK, investment by British companies abroad and foreign direct investment data
- UK, EY Item Club winter economic forecast for the British economy
- Results: Baker Hughes Q4
- Australia, Eurozone, France, Germany, Japan, UK, US: S&P Global purchasing managers’ index (PMI) for manufacturing and services
- Germany, GfK Consumer Climate survey
- UK, December public sector net borrowing figures
- UK, CBI industrial trends survey
- Results: Associated British Foods Q1 trading update, Brown & Brown Q4, Canadian National Railway Q4, Capital One Financial Q4, Danaher Q4, General Electric Q4, Halliburton Q4, Invesco Q4, Johnson & Johnson Q4, Lockheed Martin Q4, Microsoft Q2, Raytheon Technologies Q4, Saga trading update, Tata Motors Q3, Texas Instruments Q4, 3M Q4, Travelers Q4, Union Pacific Q4, Verizon Communications Q4
- Australia, Q4 and December CPI inflation rate data
- Canada, Bank of Canada monetary policy committee rate announcement
- Germany, January Ifo Business Climate report
- Sweden, December PPI inflation rate data
- Spain, December PPI inflation rate data
- UK, December producer price index (PPI) inflation rate data
- Results: Alstom Q3 sales update, ASML FY, AT&T Q4, Boeing Q4, CMC Markets Q3 trading update, easyJet Q1 trading update, Givaudan FY, IBM Q4, Kimberly-Clark Q4, Levi Strauss Q4, Lonza FY, Raymond James Q1, Tesla Q4, Tod’s FY sales figures, JD Wetherspoon Q2 trading update, Woodside Energy Q4
- South Africa, December PPI inflation rate data. Also, central bank’s monetary policy committee rate-setting meeting.
- UK, quarterly productivity statistics
- UK, Zoopla house price index report
- US, flash Q4 GDP data
- US, Q4 consumer spending figures
- Results: Banco Sabadell Q4, Comcast Q4, CVS Group trading update, Diageo H1, Fevertree Drinks FY trading update, Foxtons FY trading statement, Intel Q4, JCDecaux Q4, JetBlue Airways Q4, LVMH FY, Marsh & McLennan Q4, Mastercard Q4, Nokia Oyj Q4, Northrop Grumman Q4, Salvatore Ferragamo FY, Rank Group H1, SAP FY, St James’s Place Q4 trading statement, STMicroelectronics FY, Telia FY, Tate & Lyle Q3 trading statement, T Rowe Price Q4, Visa Q1, Volvo Group Q4, Wizz Air Q3
- Australia, Q4 PPI inflation rate data
- France, January consumer confidence survey
- Spain, flash Q4 GDP data
- US, December personal income and spending data
- Results: American Express Q4, Charles Schwab winter business update, Chevron Q4, Colgate-Palmolive Q4, H&M FY, HCA Healthcare Q4, LG Electronics Q3, Rémy Cointreau Q3 sales update, YouGov H1 trading statement
As you can see there are plenty of earnings reports to keep us all busy. The markets have got off to a solid start this year but the rally does seemed to have stalled so it will be looking for guidance as to which way to go from here.
Our market bias at the moment:
Most of the portfolios on The Portfolio Platform now have some exposure to a few short positions. Many are hedged which is a huge advantage of having a portfolio on TPP. If the markets drop, what does your wealth manager do?
If you don’t have a portfolio on TPP, or you have yet to make it live, please do contact us here and we’d be happy to help.
After a solid end to 2022, and a particularly pleasing Q4- our traders and trading teams will be keen to start 2023 on the front foot.
Profits were made on all side of the markets in generally choppy price action.
What will Q1 bring? More of the same?
Looking further ahead, what should we expect in 2023?
One thing we do know is that one year is a long time in the markets, and if last year is anything to go by- expect the unexpected.
Whether global markets bounce back this year, or trade in a range- our traders are tasked with achieving a minimum of 2 x their market benchmark per annum.
Here is to a great year in 2023.
If you currently have an underperforming portfolio elsewhere, or are holding cash whilst waiting for an entry point- contact our team for a FREE market consultation.
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